Abstract
This paper estimates the social rates of return and the value of the wider benefits of learning, beyond earnings arising from expanding access to bachelor’s degrees and to short degrees in the UK and the US. The term ‘short degrees’ is used here as a user-friendly term to refer to Associate Degrees in the US and to sub-baccalaureate level 4 higher education qualifications in the UK, even though some of the UK programmes are not technically certified with ‘degrees’. ‘Short degrees’ does not refer here to ‘accelerated’ courses. Bachelor’s Degrees is a commonly used term in both countries. Updated ‘narrow’ social rates of return based only on earnings are calculated by the full method using institutional unit costs and distributed lags based on the full age-earnings profile. This approach results in some new insights. It also estimates the value of the private and social non-market benefits beyond earnings. The calculations correct for net ability bias, consider the time spent acquiring each qualification, and include social rates of return at basic education, Masters, and PhD levels. Transitory effects from the recession are considered.
Non-market private and social benefits beyond earnings are estimated based on a systematic analysis of existing studies. This is not a literature review but instead builds on the best that has been done to go the next step of estimating the economic value of the non-market benefits by avoiding overlap, standardizing, and averaging independent studies. Since graduates spend about twice as much time using their human capital in the home or in the community as on the job it is not surprising that the estimated value of the non-market outcomes turns out to be significantly larger than the earnings benefits. The paper concludes with implications of these non-market outcomes for regional economic development.
Policy implications follow from the fact that poor information about the non-market private and social benefits, which are above and beyond earnings, appears to be contributing to market failure in higher education markets and under-investment in higher education. Short degrees are also a less costly route for increasing access for bright students from lower-income families, and offer opportunities for improving the quality of the first two years of college. New total social rates of return indicate that there are opportunities for greater overall economic efficiency that are conducive to faster development.